Pensions, fairness and Lamborghinis: budget changes to the annuities market are a lesson in the fallacies of freedom

From April 2015, individuals in defined contribution pension schemes will no longer be required to ‘annuitise’ their pensions saving, that is, turn their pot of savings into a lifelong, regular income by purchasing an annuity product from an insurance company. Boris Johnson’s response typified the free-wheeling, ultra-neoliberal attitude behind this apparent liberation (announced in last week’s budget by George Osborne) by rejoicing in the pensions minister’s suggestion that savers will be able to buy a Lamborghini rather than being forced to annuitise, and describing the measure as ‘power to the people’.

In making such arguments, the coalition government are playing upon popular concerns (which have, ironically, emanated most strongly from the financial sector’s left-wing critics) that the annuities market is replete with ‘rip-off’ deals, using this sentiment to justify a radical individualisation of the last major aspect of the pensions system that has a collective element. But the freedom that will be unleashed by this measure is fallacious and unfair.

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Image: David Villarreal Fernadez